The following information should be read in conjunction with the consolidated
financial statements and related notes thereto included in this Annual Report on
Form 10-K. In addition to historical information, this report contains
forward-looking statements that involve risks and uncertainties which may cause
our actual results to differ materially from plans and results discussed in
forward-looking statements. We encourage you to review the risks and
uncertainties discussed in the sections entitled Item 1A. "Risk Factors" and
"Forward-Looking Statements" included at the beginning of this Annual Report on
Form 10-K. The risks and uncertainties can cause actual results to differ
significantly from those forecast in forward-looking statements or implied in
historical results and trends. We caution readers not to place undue reliance on
any forward-looking statements made by us, which speak only as of the date they
are made. We disclaim any obligation, except as specifically required by law and
the rules of the SEC, to publicly update or revise any such statements to
reflect any change in our expectations or in events, conditions or circumstances
on which any such statements may be based, or that may affect the likelihood
that actual results will differ from those set forth in the forward-looking
statements.
This section of this Form 10-K generally discusses 2020 and 2019 items and
year-to-year comparisons between 2020 and 2019 of the Company. Discussions of
2018 items and year-to-year comparisons between 2019 and 2018 that are not
included in this Form 10-K can be found in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in Part II, Item 7 of the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2020.
Overview
We are a clinical stage biotechnology company leading the field of redosable
gene therapy for the treatment serious rare diseases. Using our patented
platform that is based on engineered HSV-1, we create vectors that efficiently
deliver therapeutic transgenes to cells of interest in multiple organ systems.
The cell's own machinery then transcribes and translates the encoded effector to
treat or prevent disease. We formulate our vectors for non-invasive or minimally
invasive routes of administration at a doctor's office or potentially in the
patient's home. Our goal is to develop easy to use, redosable gene therapies to
dramatically improve the lives of patients living with rare diseases. Our
innovative technology platform is supported by in-house, commercial scale cGMP
manufacturing capabilities. Refer to Part I, Item 1 - Business for more
information about our clinical development pipeline and research programs and
the status of our product candidates.
Pipeline Highlights:
•B-VEC is a topical gel containing our novel vector designed to deliver two
copies of the COL7A1 transgene for the treatment of DEB, a serious rare skin
disease caused by missing or mutated COL7. The randomized, double-blind,
placebo-controlled GEM-3 pivotal study is ongoing, with top line data
anticipated in 4Q21. Details of the pivotal study can be found at
www.clinicaltrails.gov under NCT identifier NCT04491604. Nothing included on
these websites shall be deemed incorporated by reference into this Annual Report
on Form 10-K.
•KB105 is a topical gel containing our novel vector designed to deliver two
copies of the TGM1 transgene for the treatment of TGM1-ARCI, a serious rare skin
disorder caused by missing or mutated TGM1 protein. A randomized,
placebo-controlled Phase 1/2 study is ongoing. Details of the Phase 1/2 study
can be found at www.clinicaltrials.gov under NCT identifier NCT04047732. Nothing
included on these websites shall be deemed incorporated by reference into this
Annual Report on Form 10-K.
•KB407 is an inhaled (nebulized) formulation of our novel vector designed to
deliver two copies of the full-length CFTR transgene for the treatment of cystic
fibrosis, a serious rare lung disease caused by missing or mutated CFTR protein.
We expect to initiate clinical testing in 1H21.
•KB104 is a topical gel formulation of our novel vector designed to deliver two
copies of the SPINK5 transgene for the treatment of Netherton Syndrome, a
debilitating autosomal recessive skin disorder caused by missing or mutated
SPINK5 protein. We expect to file an IND in 2H21.
We have several other product candidates in various stages of preclinical
development.
We are also leveraging the ability of our platform to deliver proteins of
interest to cells in the skin in the context of aesthetic medicine via our
wholly-owned subsidiary Jeune, Inc. A Summary description of Jeune's key product
candidate and its status is as follows:
•KB301 is a solution for intradermal injection designed to deliver two copies of
the COL3A1 transgene to address signs of aging or damaged skin caused by
declining levels of, or damaged proteins within the extracellular matrix,
including type III collagen. A Phase 1 safety study is currently ongoing.
Details of the Phase 1 study can be found at www.clinicaltrials.gov under NCT
identifier NCT04540900. Nothing included on these websites shall be deemed
incorporated by reference into this Annual Report on Form 10-K
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Jeune has several other aesthetic medicine product candidates in various stages
of preclinical development.
Business Highlights:
•On May 21, 2020, the Company completed a public offering of 2,275,000 shares of
its common stock to the public at $55.00 per share. Net proceeds to the Company
from the offering were $117.2 million after deducting underwriting discounts and
commissions of approximately $7.5 million, and other offering expenses payable
by the Company of approximately $463 thousand.
•On December 31, 2020, the Company entered into a sales agreement (the "Sales
Agreement") with Cowen and Company, LLC ("Cowen") with respect to an
at-the-market equity offering program ("ATM Program"), under which Cowen will
act as the Company's agent and/or principal and may issue and sell from time to
time, during the term of the Sales Agreement, shares of its common stock, par
value $0.0001 per share, having an aggregate offering price up to $150.0 million
("Placement Shares"). In 2021, 262,500 shares of common stock have been issued
pursuant to the ATM Program for net proceeds of $16.9 million, resulting in a
remaining $132.5 million available for issuance under the ATM Program.
•On January 29, 2021, the Company entered into a Purchase and Sale Agreement
("PSA") for ASTRA with Northfield related to the purchase option exercised by
the Company on October 15, 2020 for a purchase price of $9.4 million. The
transaction is expected to close in early March 2021 subject to customary
closing conditions.
•On February 1, 2021, the Company completed a public offering of 2,211,538
shares of its common stock, including 288,461 shares purchased by the
underwriters, at $65.00 per share. Net proceeds to the Company from the offering
were $135.0 million after deducting underwriting discounts and commissions of
approximately $8.6 million, and other estimated offering expenses payable by the
Company of approximately $193 thousand.
COVID-19
In December 2019, COVID-19 was first reported in Wuhan, China and in March 2020,
a global pandemic was declared by the World Health Organization. In an effort to
slow the spread of the virus, certain governments, including the Commonwealth of
Pennsylvania where the Company's primary offices, laboratory and manufacturing
spaces are located, enacted stay-at-home orders, and sweeping restrictions to
travel were initiated by corporations and governments. Although these
restrictions have been lifted in some areas, it is not known at this time
whether they will be reestablished or the extent to which the Company will be
impacted. The degree of COVID-19's effect on the Company's clinical, operational
and financial performance will depend on future developments, including
additional protective measures that may be implemented by governmental
authorities or the Company to protect its employees, or by investigators,
caregivers or patients to minimize exposure, all of which are uncertain and
difficult to predict. While to date the impact of COVID-19 on our business and
clinical trials has been minimal, we will continue to assess the potential
impact of the COVID-19 pandemic on our business and operations, including our
supply chain and preclinical and clinical trial activities. For additional
information regarding the impact of the coronavirus pandemic, please see "Risk
Factor - Business interruptions resulting from the COVID-19 outbreak or similar
public health crises could cause a disruption of the development efforts.of our
product candidates and adversely impact our business."
Financial Overview
Revenue
We currently have no approved products for commercial marketing or sale and have
not generated any revenue from the sale of products or other sources to date. In
the future, we may generate revenue from product sales, royalties on product
sales, or license fees, milestones, or other upfront payments if we enter into
any collaborations or license agreements. We expect that our future revenue will
fluctuate from quarter to quarter for many reasons, including the uncertain
timing and amount of any such payments and sales.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred to advance
our preclinical and clinical candidates, which include:
•expenses incurred under agreements with contract manufacturing organizations,
consultants and other vendors that conduct our preclinical activities;
•costs of acquiring, developing and manufacturing clinical trial materials and
lab supplies;
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•facility costs, depreciation and other expenses, which include direct expenses
for rent and maintenance of facilities and other supplies; and
•payroll related expenses, including stock-based compensation expense.
We expense internal research and development costs to operations as incurred. We
expense third party costs for research and development activities, such as the
manufacturing of preclinical and clinical materials, based on an evaluation of
the progress to completion of specific tasks such as manufacturing of drug
substance, fill/finish and stability testing, which is provided to us by our
vendors.
We expect our research and development expenses will increase as we continue the
manufacturing of preclinical and clinical materials and manage the clinical
trials of, and seek regulatory approval for, our product candidates and expand
our product portfolio. In the near term, we expect that our research and
development expenses will increase as we continue our ongoing GEM-3 pivotal
study for B-VEC, our Phase 1/2 clinical trial for KB105, our Phase 1 safety
study for KB301, and incur preclinical expenses for our other product
candidates. Due to the numerous risks and uncertainties associated with product
development, we cannot determine with certainty the duration, costs and timing
of this clinical trial, and, as a result, the actual costs to complete this
planned clinical trial may exceed the expected costs.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other
related costs, including stock-based compensation, for personnel in our
executive, commercial, business development and other administrative functions.
General and administrative expenses also include legal fees relating to
intellectual property and corporate matters, professional fees for accounting,
auditing, tax and consulting services, insurance costs, travel, facility related
expenses and other operating costs.
We anticipate that our general and administrative expenses will increase in the
future to support the continued research and development of our product
candidates and to operate as a public company. These increases will likely
include increased costs for insurance, costs related to the hiring of additional
personnel and payments to outside consultants, lawyers and accountants, among
other expenses. Additionally, if and when we believe a regulatory approval of
our first product candidate appears likely, we anticipate that we will increase
our salary and personnel costs and other expenses as a result of our preparation
for commercial operations
Interest Income
Interest income consists primarily of income earned from our cash, cash
equivalents and investments.
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial position and results
of operations is based on our financial statements, which have been prepared in
accordance with U.S. generally accepted accounting principles, or GAAP. The
preparation of financial statements in conformity with GAAP requires us to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. On an ongoing basis, we evaluate estimates
which include, but are not limited to, estimates related to clinical trial and
contract manufacturing prepayments and accruals, stock-based compensation
expense, construction-in-progress, and reported amounts of related expenses
during the period. We base our estimates on historical experience and other
market-specific or other relevant assumptions that we believe to be reasonable
under the circumstances. Actual results may differ materially from those
estimates or assumptions.
While our significant accounting policies are described in more detail in the
notes to our financial statements appearing elsewhere in this Annual Report on
Form 10-K, we believe the following accounting policies to be most critical to
the judgments and estimates used in the preparation of our financial statements.
Accrued Research and Development Expenses
As part of the process of preparing our financial statements, we are required to
estimate our accrued research and development expenses, current assets and other
current liabilities. This process involves reviewing open contracts and
commitments, communicating with our personnel to identify services that have
been performed for us and estimating the level of service performed and the
associated cost incurred for the service when we have not yet been invoiced or
otherwise notified of the actual cost. The majority of our service providers
invoice us monthly in arrears for services performed or when contractual
milestones are met. We make estimates of our accrued research and development
expenses, current assets and other current liabilities as of each balance sheet
date in our financial statements based on facts and circumstances known to us at
that
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time. Examples of estimated accrued research and development expenses, prepaid
assets and other current liabilities include fees paid to contract manufacturers
made in connection with the manufacturing of preclinical and clinical trials
materials.
We base our expenses related to clinical manufacturing on our estimates of the
services performed pursuant to contracts with the entities producing clinical
materials on our behalf. The financial terms of these agreements are subject to
negotiation, vary from contract to contract and may result in uneven payment
flows. Payments under these types of contracts depend heavily upon the
successful completion of many separate tasks involved in the manufacturing of
drug product. In accruing service fees, we estimate the time period over which
services will be performed, and the actual services performed in each period. If
our estimates of the status and timing of services performed differs from the
actual status and timing of services performed we may report amounts that are
too high or too low in any particular period. To date, there have been no
material differences from our estimates to the amount actually incurred.
Stock-Based Compensation
We have applied the fair value recognition provisions of Financial Accounting
Standards Board Accounting Standards Codification, or ASC, Topic
718, Compensation-Stock Compensation ("ASC 718"), to account for stock-based
compensation for employees and ASC 718 and ASC 505, Equity ("ASC 505"), for
non-employees for 2018. We recognize compensation costs related to stock options
granted to employees based on the estimated fair value of the awards on the date
of grant. Stock compensation related to non-employee awards is re-measured in
2018 at each reporting period until the awards are vested. Described below is
the methodology we have utilized in measuring stock-based compensation expense.
Determining the amount of stock-based compensation to be recorded requires us to
develop estimates of the fair value of stock-based awards as of their
measurement date. We recognize stock-based compensation expense over the
requisite service period, which is the vesting period of the award. Calculating
the fair value of stock-based awards requires that we make highly subjective
assumptions. We use the Black-Scholes option pricing model to value our stock
option awards. Use of this valuation methodology requires that we make
assumptions as to the volatility of our common stock, the risk-free interest
rate for a period that approximates the expected term of our stock options and
our expected dividend yield. Because we are a company with a limited operating
history, we utilize data from a representative group of publicly traded
companies to estimate expected stock price volatility. We selected
representative companies from the biopharmaceutical industry with
characteristics similar to us. We use the simplified method as prescribed by the
SEC Staff Accounting Bulletin No. 107, Share-Based Payment as we do not have
sufficient historical stock option activity data to provide a reasonable basis
upon which to estimate the expected term of stock options granted to employees.
For non-employee grants, we use an expected term equal to the remaining
contractual term of the award in 2018. We utilize a dividend yield of zero based
on the fact that we have never paid cash dividends and have no current intention
of paying cash dividends. The risk-free interest rate used for each grant is
based on the U.S. Treasury yield curve in effect at the time of grant for
instruments with a similar expected life.
Under ASC 718, we elected to estimate the level of forfeitures expected to occur
and record stock-based compensation expense only for those awards that we
ultimately expect will vest. During the years ended December 31, 2020 and 2019,
our estimated annual forfeiture rate was 14.74% and 10.00%, respectively.
Leases
We adopted FASB ASC Topic 842, Lease ("ASC 842") on January 1, 2019, with no
restatement of prior periods or cumulative adjustment to retained earnings. Upon
adoption, the Company took advantage of the transition package of practical
expedients permitted within ASC 842, which allowed the Company not to reassess
previous accounting conclusions around whether arrangements were, or contained
leases, as well as to carry forward both the historical classification of leases
and the treatment of initial direct costs for existing leases.
As the Company's lease agreements do not provide an implicit rate and as the
Company does not have external borrowings, we use an estimated incremental
borrowing rate based on the information available at lease commencement in
determining the present value of lease payments. The incremental borrowing rate
is the rate of interest that the Company would expect to borrow on a
collateralized and fully amortizing basis over a similar term an amount equal to
the lease payments in a similar economic environment.
For lease arrangements where it has been determined that the Company has control
over an asset that is under construction and is thus considered the accounting
owner of the asset during the construction period, the Company records a
construction-in-progress asset ("CIP") and corresponding financial obligation on
the consolidated balance sheet. Once the construction is complete, an assessment
will be performed to determine whether the lease meets certain "sale-leaseback"
criteria. If the sale-leaseback criteria are determined to be met, the Company
will remove the asset and related financial
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obligation from the balance sheet and treat the building lease as either an
operating or finance lease based on our assessment of the guidance. If, upon
completion of construction, the project does not meet the "sale-leaseback"
criteria, the lease will be treated as a financing obligation and the Company
will depreciate the asset over its estimated useful life for financial reporting
purposes.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the JOBS Act. Under the JOBS
Act, emerging growth companies can delay adopting new or revised accounting
standards issued subsequent to the enactment of the JOBS Act until such time as
those standards apply to private companies. We have irrevocably elected not to
avail ourselves of this exemption from new or revised accounting standards and,
therefore, will be subject to the same new or revised accounting standards as
other public companies that are not emerging growth companies.
Results of Operations
Years Ended December 31, 2020, 2019 and 2018
                                                              Years Ended December 31,                                Change
                                                                                                            2020 vs.          2019 vs.
(in thousands)                                       2020               2019               2018               2019              2018
Expenses
Research and development                         $  17,936          $  15,616          $   7,761          $   2,320          $  7,855
General and administrative                          15,063              6,465              4,155              8,598             2,310
Total operating expenses                            32,999             22,081             11,916             10,918            10,165
Loss from operations                               (32,999)           (22,081)           (11,916)           (10,918)          (10,165)
Other Expense
Interest and other income, net                         832              2,993              1,027             (2,161)            1,966
Total interest and other income, net                   832              2,993              1,027             (2,161)            1,966
Net loss                                         $ (32,167)         $ (19,088)         $ (10,889)         $ (13,079)         $ (8,199)


Research and Development Expenses
Research and development expenses increased $2.3 million for the year ended
December 31, 2020 compared to the year ended December 31, 2019. Higher research
and development expenses were due to increases in lab supplies of $142 thousand,
payroll related expenses of approximately $2.0 million which is primarily driven
by an increase in headcount to support overall growth and includes a $417
thousand increase in stock-based compensation, and other research and
development expenses of $757 thousand, with a decrease in outsourcing research
and development activities of $560 thousand.
Research and development expenses increased $7.9 million for the year ended
December 31, 2019 compared to the year ended December 31, 2018. Higher research
and development expenses were due to increases in professional services related
to outsourced manufacturing, in-vivo and clinical studies of $2.3 million,
payroll, employee benefits and stock-based compensation of $1.9 million due to
an increase in headcount as we scaled up our research and development efforts
for our 2 leading product candidates, B-VEC and KB105, lab supplies of $2.2
million, and other research and development expenses of $1.5 million.
General and Administrative Expenses
General and administrative expenses increased $8.6 million for the year ended
December 31, 2020 compared to the year ended December 31, 2019. Higher general
and administrative spending was due largely to increased payroll related
expenses of approximately $4.0 million which is primarily driven by an increase
in headcount to support overall growth and includes an approximate $1.6 million
increase in stock-based compensation, market research related expenses of
approximately $2.0 million, legal and professional fees of approximately
$1.6 million, insurance expense of $693 thousand and other administrative
expenses of $295 thousand.
General and administrative expenses increased $2.3 million for the year ended
December 31, 2019 compared to the year ended December 31, 2018. Higher general
and administrative spending was due largely to increases in legal and
professional services of $184 thousand, payroll, employee benefits and
stock-based compensation costs of $1.5 million, insurance expenses of $242
thousand, and other administrative costs of $434 thousand.
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Interest and Other Income
Interest and other income for the year ended December 31, 2020 and 2019 was $832
thousand and $3.0 million, respectively, and consisted of interest and dividend
income earned from our cash, cash equivalents and investments. This decrease was
driven by a decline in market interest rates.
Interest and other income for the year ended December 31, 2019 and 2018 was $3.0
million and $1.0 million, respectively, and consisted of interest and dividend
income earned from our cash, cash equivalents and investments. This increase was
primarily driven by an increase in our cash position in 2019 as compared to
2018.
Liquidity and Capital Resources
Overview
At December 31, 2020, our cash, cash equivalents and short-term investments
balance was approximately $271.3 million. Since operations began, we have
incurred operating losses. Our net losses were $32.2 million and $19.1 million
for the years ended December 31, 2020 and 2019, respectively. At December 31,
2020, we had an accumulated deficit of $71.2 million. With the net proceeds
raised from our public and private securities offerings, including the public
offering completed on May 21, 2020, the ATM Program and the public offering
completed on February 1, 2021, the Company believes that its cash, cash
equivalents and short-term investments will be sufficient to allow us to fund
our operations for at least 12 months from the filing date of this Form 10-K.
As the Company continues to incur losses, a transition to profitability is
dependent upon the successful development, approval and commercialization of our
product candidates and the achievement of a level of revenues adequate to
support the Company's cost structure. The Company may never achieve
profitability, and unless and until it does, the Company will continue to need
to raise additional capital.
Costs related to clinical trials can be unpredictable and therefore there can be
no guarantee that we will have sufficient capital to fund our continued clinical
studies of B-VEC, KB105, KB301 or our planned preclinical studies for our other
product candidates, or our operations. Further, we do not expect to generate any
product revenues until 2022, at the earliest, assuming we receive marketing
approval for B-VEC on the schedule we currently contemplate. While we are in the
process of building out our internal vector manufacturing capacity, some of our
manufacturing activities will be contracted out to third parties. Additionally,
we currently utilize third-party contract research organizations to carry out
our clinical development activities. As we seek to obtain regulatory approval
for any of our product candidates, we expect to incur significant
commercialization expenses as we prepare for product sales, marketing,
manufacturing, and distribution. Our funds may not be sufficient to enable us to
conduct pivotal clinical trials for, seek marketing approval for or commercially
launch B-VEC, KB105, KB301 or any other product candidate. Accordingly, to
obtain marketing approval for and to commercialize this or any other product
candidates, we may be required to obtain further funding through public or
private equity offerings, debt financings, collaboration and licensing
arrangements or other sources. Adequate additional financing may not be
available to us on acceptable terms, if at all. Our failure to raise capital
when needed could have a negative effect on our financial condition and our
ability to pursue our business strategy.
Operating Capital Requirements
Our primary uses of capital are, and we expect will continue to be for the near
future, compensation and related expenses, manufacturing costs for preclinical
and clinical materials, third party clinical trial research and development
services, laboratory and related supplies, clinical costs, legal and other
regulatory expenses and general overhead costs. In order to complete the process
of obtaining regulatory approval for any of our product candidates and to build
the sales, manufacturing, marketing and distribution infrastructure that we
believe will be necessary to commercialize our product candidates, if approved,
we will require substantial additional funding.
We have based our projections of operating capital requirements on assumptions
that may prove to be incorrect and we may use all of our available capital
resources sooner than we expect. Because of the numerous risks and uncertainties
associated with research, development and commercialization of pharmaceutical
products, we are unable to estimate the exact amount of our operating capital
requirements. Our future funding requirements will depend on many factors,
including, but not limited to:
•the timeline and costs of our pivotal Phase 3 clinical trial for B-VEC;
•the progress, timing and costs of our ongoing Phase 1/2 clinical trials for
KB105;
•the progress, results and costs of our Phase 1 clinical trials for KB301;
•the progress, timing, and costs of manufacturing of B-VEC for our pivotal Phase
3 clinical trials;
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•the continued development and the filing on an IND application for future
product candidates;
•the initiation, scope, progress, timing, costs and results of drug discovery,
laboratory testing, manufacturing, preclinical studies and clinical trials for
any other product candidates that we may pursue in the future, if any;
•the costs of maintaining our own commercial-scale cGMP manufacturing
facilities;
•the outcome, timing and costs of seeking regulatory approvals;
•the costs associated with the manufacturing process development and evaluation
of third-party manufacturers;
•the costs of future activities, including product sales, medical affairs,
marketing, manufacturing and distribution, in the event we receive marketing
approval for our current and future product candidates;
•the extent to which the costs of our product candidates, if approved, will be
paid by health maintenance, managed care, pharmacy benefit and similar
healthcare management organizations, or will be reimbursed by government
authorities, private health coverage insurers and other third-party payors;
•the costs of commercialization activities for our current and future product
candidates if we receive marketing approval for such product candidates we may
develop, including the costs and timing of establishing product sales, medical
affairs, marketing, distribution and manufacturing capabilities;
•subject to receipt of marketing approval, if any, revenue received from
commercial sale of our current and future product candidates;
•the terms and timing of any future collaborations, licensing, consulting or
other arrangements that we may establish;
•the amount and timing of any payments we may be required to make, or that we
may receive, in connection with the licensing, filing, prosecution, maintenance,
defense and enforcement of any patents or other intellectual property rights,
including milestone and royalty payments and patent prosecution fees that we are
obligated to pay pursuant to our license agreements;
•our current license agreements remaining in effect and our achievement of
milestones under those agreements;
•our ability to establish and maintain collaborations and licenses on favorable
terms, if at all; and
•the extent to which we acquire or in-license other product candidates and
technologies.
We expect that we will need to obtain substantial additional funding in order to
receive regulatory approval and to commercialize our product candidates. To the
extent that we raise additional capital through the sale of common stock,
convertible securities or other equity securities, the ownership interests of
our existing stockholders may be materially diluted and the terms of these
securities could include liquidation or other preferences that could adversely
affect the rights of our existing stockholders. In addition, debt financing, if
available, would result in increased fixed payment obligations and may involve
agreements that include restrictive covenants that limit our ability to take
specific actions, such as incurring additional debt, making capital expenditures
or declaring dividends, that could adversely affect our ability to conduct our
business. If we are unable to raise capital when needed or on attractive terms,
we could be forced to significantly delay, scale back or discontinue the
development or commercialization of our product candidates, seek collaborators
at an earlier stage than otherwise would be desirable or on terms that are less
favorable than might otherwise be available, and relinquish or license,
potentially on unfavorable terms, our rights to our product candidates that we
otherwise would seek to develop or commercialize ourselves.
Cash Flows
The following table summarizes our sources and uses of cash (in thousands):
                                                  Years Ended December 31,
                                                    2020

2019


Net cash used in operating activities       $     (26,083)           $

(18,713)


Net cash used in investing activities             (11,181)

(4,968)


Net cash provided by financing activities         118,019              107,525
Net increase in cash                        $      80,755            $  83,844


Operating Activities
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Net cash used in operating activities for the year December 31, 2020 was $26.1
million and consisted primarily of a net loss of $32.2 million adjusted for
non-cash items of $5.2 million primarily made up of depreciation and
amortization of $1.9 million and stock-based compensation expense of $3.3
million, and cash used by decreases in net operating liabilities of
approximately $928 thousand.
Net cash used in operating activities for the year ended December 31, 2019 was
$18.7 million and consisted primarily of a net loss of $19.1 million adjusted
for non-cash items of depreciation of $748 thousand, stock-based compensation
expense of $1.2 million, loss on disposals of fixed assets of $67 thousand,
amortization of right-of-use assets of $226 thousand, and cash used by decreases
in net operating assets and liabilities of $1.9 million.
Investing Activities
Net cash used in investing activities for the year ended December 31, 2020 was
approximately $11.2 million and consisted primarily of purchases of $3.2 million
of short-term available-for-sale investment securities, and expenditures of
$14.8 million on the build-out of our ASTRA facility, leasehold improvement of
new office space, and purchases of computer and laboratory equipment, partially
offset by proceeds of $6.9 million from maturities of short-term investments.
Net cash used in investing activities for the year ended December 31, 2019 was
$5.0 million and consisted primarily of purchases of $8.6 million of short-term
available-for-sale investment securities, proceeds of $10.5 million from
maturities of short-term investments, purchases of $497 thousand of long-term
investments, expenditures of $6.4 million for the build-out of our GMP facility
and purchases of computer and laboratory equipment.
Financing Activities
Net cash provided by financing activities for the year ended December 31, 2020
was $118.0 million and was primarily from proceeds from our public offering on
May 21, 2020 of 2,275,000 shares of our common stock to the public at $55.00 per
share. Net proceeds to the Company from the offering were $117.2 million after
deducting underwriting discounts and commissions of approximately $7.5 million
and other offering expenses of approximately $463 thousand.
Net cash provided by financing activities for the year ended December 31, 2019
was $107.5 million and was primarily from net proceeds of $107.1 million after
underwriter discounts and other offering expenses payable by the Company from a
follow-on public offering of 2,853,946 shares of common stock at a price of
$40.00 per share, which includes the sale of 353,946 shares of the Company's
common stock pursuant to the underwriters' exercise of their option to purchase
additional shares.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in Item
303(a)(4)(ii) of Regulation S-K promulgated by the SEC.
Contractual Obligations
The following table summarizes our outstanding contractual obligations as of
payment due date by period at December 31, 2020 (in thousands):
                                                              Less than           Years            Years           More Than
                                             Total             1 year              1-3              4-5             5 Years
Future minimum operating lease payments
(1)(2)(3)                                 $ 23,525          $    1,430          $ 2,956          $ 3,075          $  16,064
Clinical supply and product manufacturing
agreement obligations                     $  3,631          $    3,631          $     -          $     -          $       -
Other contractual obligations             $  2,736          $    2,736          $     -          $     -          $       -


(1)We lease approximately 29,000 square feet of office and laboratory space at
2100 Wharton St., Suite 701, Pittsburgh, Pennsylvania. The lease expires
February 2027.
(2)On December 26, 2019, we entered into a lease agreement for our second
commercial gene therapy facility in the Pittsburgh, Pennsylvania area ("ASTRA
lease"). The 150,000 square foot facility is under construction and is expected
to be completed and validated in 2022. The lease will commence when the space is
delivered by Landlord as substantially complete and available for access, which
is anticipated to be in 1H 2021, and has an initial term that expires on October
31, 2035. The ASTRA lease contains an option ("Purchase Option") to purchase the
building, related improvements and take corresponding assignment of the
Landlord's rights under its existing Ground Lease (the "Ground Lease"). On
October 15, 2020, the Company gave the Landlord notice
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of its intent to purchase ASTRA subject to the parties entering into a
commercially reasonable purchase and sale agreement.
(3)On October 5, 2020, the Company became the accounting owner of the Ground
Lease due to obtaining control over ASTRA and recorded the applicable
right-of-use asset and corresponding lease liability as of October 5, 2020. The
lease expires in April 2071.
Recent Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-13 - Fair Value Measurement (Topic 820)
("ASU 2018-13") which removes, modifies and adds disclosure requirements on fair
value measurements. ASU 2018-13 removes disclosure requirements for transfers
between Level 1 and Level 2 measurements and valuation processes for Level 3
measurements but adds new disclosure requirements including changes in
unrealized gains/losses in other comprehensive income related to recurring Level
3 measurements. The amended guidance was effective for us commencing in the
first quarter of 2020. Certain aspects may be applied prospectively while other
aspects may be applied retrospectively upon the effective date. The adoption of
the guidance resulted in us disclosing the Company's cash, cash equivalents and
available-for-sale securities by significant investment category as of December
31, 2020 and 2019.

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